Which Three of the Following Are Advantages for the Firm

question 33

Multiple Choice

Which three of the following are advantages for the firm of floating- rate, as compared with fixed- rate, borrowings?

• A) At the time of arrangement fixed rates are usually above floating rates.
• B) If interest rates fall the cost of the loan falls.
• C) Returns on the firm's assets may go up at times of higher interest rates and fall at times of lower interest rates, therefore the risk of higher rates is offset.
• D) The firm may benefit from a rise in interest rates if, as with most businesses, its profits do not rise when interest rates rise.

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Definitions:

Independent Variable

The variable in an experiment that is manipulated by the researcher to observe its effect on the dependent variable.

Dependent Variable

In experimental and statistical research, the variable that is being tested and measured, and is expected to change as a result of manipulations to the independent variable.

Random Assignment

A method used in experiments where participants are assigned to different groups in a manner that ensures each has an equal chance of being placed in any group.

Experimental Group

A group of participants in a study that receives the treatment or intervention being tested, allowing researchers to assess the effect of the treatment.